The Unexpected

 The news is out. Again.

The Federal Reserve is optimistic. Again. One wonders in their next incarnation if this heady group of central bankers can come back as chameleons, just is their nature. The latest is the end of the year is back on the table for what most likely would be a 25 basis point hike for these brave souls.

Since all the pundits and scaremongers including a certain nation's president turned out so far to be wrong about the Brexit fallout and the U.S. stock market has been artificially pushed to artificial new high records, higher interest rates is back in the air. This group over its tenure has sent more messages than an old time Western Union office.

But as usual in the vernacular of this group there's always a big if in here. If the economy is on more stable footing than when they met in June this could set up a September rate hike. There is, as is usual for these clutch-at-any-straw bureaucrats, much nonsense in here. The June job numbers and a hint of inflation have rendered these nervous Nellies nervous. One governor was recently quoted as saying, "We are basically at full employment. I think the underlying fundamentals remain very sold for the U.S. economy."

That's brings up a couple of questions. First, if after all this massive global money printing this is the best we can get in jobs. The second is the choice of the phrase "remain very solid" when just a short time earlier they looked fairly putrid. One guesses to the Fed aberrations, like Jacks and Queens, never come in pairs.

We think the Fed is so far behind in the count given the global ZIRP and NIRP nonsense, at least three or four bubbles afloat depending on how much one want to contest the point, one should be positioning oneself for the unexpected. The world is drowning is debt. Nearly a decade of monetary madness has only piled up more debt. Much of that will never be repaid. Overt beggar-thy-neighbor tactics proved fruitless, consumers, at least for now, got he message: they're on their own, and central bankers now have about as much credibility as Joe Biden when it comes to plagiarism.

If you like ducks in a row, now might be your time.

Overnight

The Nikkei overnight was trading lower, appently putting an end to a six-day run of market gains. The KOSPI was also down 0.2% and the Shanghai Composite Index slipped 0.3% lower as Asian shares traded mixed. The Hong Kong Hand Aend rallied 0.7%.

A sharp rise in the U.S. dollar sent a cautious message to investors ahead of Japanese earnings reports. According to the WSJ, "The focus in Japan is now switching from expectations of more policy easing to caution ahead of the coming earnings season, with companies likely hurt by a strong local currency."

According to the WSJ, Elsewhere in the region, Australia’s S&P/ASX 200 recovered from early weakness and was trading up 0.6%, thanks to higher commodity prices. With the exception of aluminum, copper, nickel and zinc prices recovered. The rise in the dollar had led to weakness in commodity prices earlier in the day.

Earlier in the session the People's Bank of China upset the market applecart by setting the yuan stringer against the U.S. dollar despite the dollar's overnight strength. Some claim the POB's action was a sign to show the government was not not trying to boost its competitiveness by weakening the yuan. Meanwhile, the International Monetary Fund cut its global economic growth outlook for 2016 on Tuesday, citing the uncertain fallout of the Brexit vote. It expects the world economy to grow 3.1% this year, down 0.1 percentage point from the outlook in April. However, it seemed to have little impact on markets, the Journal noted.

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Overnight

Monday in Japan was a public holiday, but the Nikkei 225 struggled a bit to trade 0.5% higher Tuesday as most Asian shares fell on weaker oil prices that toned down some of the hoopla attached to the Dow and the S&P 500 run-ups and many on Wall Street touted the market was on a path to further highs.

Just last week the MSCI's broadest index outside Japan made a new nine-month high, but couldn't sustain the upward trend as it fell 0.6%. In China both the Shanghai and Shenzhen Indexes were off as the Chinese yuan firmed against the U.S. dollar after falling below a psychologically support level of 6.7 for the first time in six years. More than a few hedge fund managers have been predicting a weaker yuan for some time now. apart of the pressure on oil prices stemmed from fear about rising stockpiles. U.S. crude was down 0.4% at $45.07 and Brent was off 0.3% trading at $46.82 a barrel.

The dollar softened against the yen after recently registering a three-week high, trading at 105.90 yen after touching 106.33 earlier in the day. Up later in the week is the ECB meeting on Thursday, it's last one before an eight-week summer break. Brexit is still on the minds of many in the EU and only  time will tell what course they will decide to take to support the EU economy given the vote caught many off guard. The Euro held firm at $1.1076. Gold traded down a bit at $1,327.87 an ounce following its down move Monday when it lost 1%.

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Take Your Choice

Goldman  Sachs has been having a bad time of it all. Recall before Brexit they warned how many jobs would leave London if the vote went the way we now know it did.

Their stock jumped last week owing to some so-called good news in the economy and the financials. Now they've sent out one of their technical water boys to give us all the good news about just how far this recent equity rally can run. Most likely someone here got a call from Fed Chair Yellen over the weekend urging the big Wall Street firm to toss out some positive stuff. the connection between the Fed and Sachs is tighter than the skin on the face of a well known female politician after one of her many facelifts.

After a post-Brexit misstep, the stock market has regained its footing and roared past all-time highs in the past week. 

The strength has been broad-based, and it appears to Sheba Jafari, a technical analyst at Goldman Sachs, that this upward trend in markets could continue for a long time.
"If this is truly a 3rd wave from June, it should really move past 2,191 and eventually reach a 1.618 target at ~2,263," Jafari wrote in a note to clients Sunday.

Jafari, who calls the recent rally "textbook," is using a method of technical analysis that posits that market behavior is orderly and moves in "waves," thus it can be tracked as long as you can read the signals the market is telling you. 

Based on these signals, Jafari believes that not only is there a short-term uptick of at least 100 points in the S&P based on Friday's closing price, but in the long run there is even more good news for stock investors. "Narrowing in even further, the move since February is likely to be wave (5) in a sequence that starting in 2010," Jafari wrote. "As such, the minimum target for wave (5)/III is 2,172 (now effectively satisfied). An extended target goes out to 2,394-2,452." 

 
businessinsider.com/goldman-textbook-rally-in-stocks-2016-7?

For the record here's a link to a Morgan Stanley piece about too bullish everyone is. As they say, you pay your money and take your choice.
businessinsider.com/morgan-stanleys-global-growth-forecasts-2016-7?

Overnight

The week ahead of Asian markets appears relatively light on data as Monday opened with a slight reaction over the weekend to the attempted coup in Turkey. Markets in Japan were closed for the Marine Day public holiday. .

In Australia, the benchmark ASX 200 was up 0.41 percent, boosted by gains in the heavily-weighted financials sub-index. South Korea's Kospi index was flat, reversing early losses of some 0.1 percent. In New Zealand, the NZX 50 was up 0.24 percent. Hong Kong's Hang Seng index gained 0.11 percent. Chinese mainland markets fell behind their regional peers, with the Shanghai composite off 0.41 percent and the Shenzhen composite down 0.76 percent.

 CNBC reported: In the broader currency market, the dollar strengthened against a basket of currencies; the dollar index was at 96.544 as of 10:40 a.m. HK/SIN, climbing from levels near 96.00 in the previous week. Experts said improvements were related to better-than-expected stateside data released late last week.


Among other major currency pairs, the Japanese yen traded at 105.59 against the greenback after climbing as high as 105.96 earlier, compared with levels near 100 two weeks ago.
The Australian dollar traded at $0.7594, retreating from levels above $0.76 in the previous week. The Aussie received a boost last week from better-than-expected Chinese data, as China is a major trading partner for Australia. 

"The news gave the Aussie a strong shot in the arm, but the momentum was unsustainable as better than expected U.S. data lifted the greenback," explained Kathy Lien, managing director of foreign exchange strategy at BK Asset Management in a Friday note.
Oil prices wavered during the Asian session, with global benchmark Brent trading up 0.38 percent at $47.79 a barrel, while U.S. crude was flat at $45.97.

The Hard Stuff

The onslaught against gold and silver is like that of propaganda, it never ends

It's interesting that propaganda and polling both start with the same letter of the alphabet. And so does pissed-off as in a great swath of the American public in what is setting up to be one of  this nation's dirtiest and perhaps bloodiest presidential election campaigns in history.

So what we have here is the three legged stool, polls such as many of those from MSM spewing out propaganda in the form of loaded numbers and a pissed-off large number of Americans who know what's happening. Take those recent polls that show Clinton ahead in swing states after getting a pass on her email scandals that everyone except her most dyed-in-corruption supporters know something rotten happened.

With gold and silver the attacks started up again right after Brexit. Both precious metals rallied, the fiat money merchants' worse nightmare. Venezuela is a good example of fiat money gone awry. To fiat money merchants and their shills in MSM the only real bull market is paper assets. Over the weekend a columnist for the WSJ wrote a pathetic piece about why bonds with negative yields were still a good buy.

He cited the obligatory Harvard study. (How much better off would this world be without Harvard?)
The study shows almost once every six years bonds since 1800 have negative real yields. His point being that today's bonds in the U.S. have "marginally positive" income and thus buyers shouldn't feel cheated or long for the so-called good old days.

He then as most MSM central bank apologists do cites bogus inflation indicators the Fed has been manipulating to their and the government's advantage for years to make his case: Bonds are still the safest way to protect against the inherent risk of stocks. Fiat money is the hallmark of Wall Street and central bankers. MSM serves their purpose quite well, being the useful idiots they are.

Given this market run-up, add to your gold and silver for the chaos that's en route. We have no associations with any gold and silver firms and we have no positions in the futures market. You want to take physical possession of the hard stuff. There is more than one way to spell insurance.

Without pushing innocents into bonds, this debt charade won't go on much longer. When the fat lady clears her throat--no apologies to the PC crowd here--it will be much too late.

In Case

In  case you didn't notice, gong int this past weekend MSM fell all over itself trying to convince us how well the economy is now doing.

Story headlines like, "Consumers Give Boost to Economy," in the WSJ to many others gives you a clue t the straw-clutching going today with all  the global turmoil. Here's an opening blurb from that piece: If here's any lingering worries about tab economy, consumers just put that to rest." The author goes on to cite retail sales for June jumped to 0.6% from 09.2% in May and the Labor Department reporting prices picked up in June.

He then cites near record low mortgage rates , new stock market highs and gasoline prices trending lower. We don't know where he lives but gasoline prices in our area have been trending higher for the past several weeks. Moreover, real estate prices and rents are higher than  most government spy satellites.

Now the stock market is another interesting case, as was pointed out in Barron's this weekend. The Nasdaq, the Dow transports and the Russell 2000 are not confirming the new highs. Also, corporate earnings seem to be petering out and the narrowness the the new records are more concerning, "...take a few hundred stocks out of the equation, the broad market hasn't surpassed the highs." There is another concern, valuation.

On the global front China remains a mystery, as enigmatic as ever, and that's if anyone can believe or trust any of the data coming out of that country. A cooling property market, a less than robust service sector, official joblessness rates that are less reliable than a politician's election promises and rising government spending versus falling private sector investment all hand over this market. And those are the things someone might know about.The unknowns are anyone's guess.

The bulls will tell you after a long trending sideways market, new highs bode well for further upside.
We like a real bull market as well as the next guy. And when the next real one comes around, we hope to make some decent profits. Meanwhile, this is a trading vehicle. sell some covered calls and buy some cheap puts on further upside.

Overnight

China was really the big news overnight as its economy grew 6.7% on-year in the April-June quarter. Economists had predicted 6.6% growth, so the minor higher blip was welcomed by many and no doubt will be twisted by others into positive spin. Reuters reported: Retail sales for June in China were up 10.6 percent on-year, industrial output for June grew 6.2 percent on-year, while fixed asset investment for the January-June period was up 9 percent on-year.

The news helped push Asian shares higher Friday with some other help from the U.S. where markets recorded another record close. The Nikkei 225 was up slightly, 0.82%; Australia's ASX 200 rose 0.64%; the South Korean Kospi rallied 0.6%; the Hang Send Index was up 0.29%. In China the Shanghai Composite added 0.18% with the Shenzhen Composite flat at 2,044.86. The broader Topix and the JPX-Nikkei Index 400 each gained 0.9 percent to 1,322.75 and 11,886.93.


 Currencies captured some attention when the Bank of England voted to hold its interest rate stready for now at 0.5% and not to change its current QE program. The UK pound traded at $1.34126 to the dollar with the dollar trading at 96.13 against a basket of currencies. the Japanese yen weakened against the buck, 105.89, as opposed to its stringer levels last week.

Find Out Why

The above chart is from DoubleLine, the firm run by billionaire bond guru Jeffery Gundlach. He calls it the "chart of the quarter."  To find out why, here is the link to the article. We recently talked about taking trades few want to take. We also talked about commodities, the area nobody wants to be in today.  Ask yourself this quite difficult question: What's the trade everyone seems to be wanting to take today? If you don't know the answer, you're probably already in it. If you are, at some point you're going to need more than the wind at your back.

advisorperspectives.com/articles/2016/07/13/gundlach-the-once-in-a-career-moment-in-the-bond-market

Overnight

The Wall Street Journal reported overnight, A week-long rally across Asian stocks hit the brakes Thursday, with investors waiting to see whether the Bank of England’s interest-rate decision would make or break further equity gains.

Japan’s Nikkei Stock Average remained the biggest outperformer in the region, gaining 0.4% to add to its 7.7% ascent this week. Investors’ hopes for fiscal-stimulus policies helped set the benchmark on track to scoring its best weekly performance so far this year.

The Nikkei 225  hit 16,355.30 as the average remained the biggest winner in the region, gaining 0.4% to add to its 7.7% ascent this week.The Japanese yen gained against the dollar, while the British pound weakened. The former is up by 0.4% at 104.28 per dollar, while the latter is down by 0.4% at 1.3192 reversing a trend where the yen weakened against the greenback, while the pound was stronger.

• Dow: 18,372.12 (+0.1%)
• S&P 500: 2,152.43 (+0.0%)
• Nasdaq: 5,005.73  (-0.3%)
• WTI crude oil: $45.15 (-3.5%)
• 10-year Treasury yield: 1.473 (-2.7%) 

Meanwhile, the rest of Asia traded like this: Australia’s S&P/ASX 200 was up 0.2%, Korea’s Kospi was down 0.2% and Hong Kong’s Hang Seng Index edged down 0.1%. China’s Shanghai Composite Index lost 0.3%, and Singapore’s Straits Times Index was off 0.1%. Gold held steady early Thursday, after rising as much as 1 percent in the previous session, buoyed by expectations that central banks could cut interest rates. 

Spot gold had inched up 0.2 percent at $1,345.46 per ounce by 0109 GMT. It rose about 0.9 percent on Tuesday, closing at $1,342.45, after touching a session-high of $1,345.20.
U.S. gold climbed 0.3 percent at $1,347 an ounce.